The Anglo Far-East Company

China grows and everyone acts as if it is a surprise. We have followed China for many years, and have been calling for strong Chinese growth in 2009. This is not due to our personal wisdom, this is due to the work of our 3 favorite economists. These economists are based in China and have been remarkably accurate in the past. We also have seen the work of 12 or more China based economists who have not been accurate in the past. Our bullish outlook for China has been based upon the economic outlook of the accurate economic forecasters. Now we get corroborations from the numbers and from the statements of government officials.

China will grow in 2009 much more than any other country of any size.

However let us be realistic, China’s growth alone or when combined with slower growth from India will not be enough to create any semblance of growth in Europe and North America.

The global depression in Europe and the US will continue and accelerate in coming months.

THE US DOLLAR AND THE REPATRIATION OF US ASSETS TO THE US….. THE CURRENT VIEW VERSUS THE RATIONAL INVESTOR

According to several currency strategists, the US dollar will continue to rally for months or even a year. They say that global fear and panic in the investment and banking environment are causing the repatriation of massive amounts of US dollar assets held overseas to be repatriated into the US and placed back into dollars. They argue that as US holders of foreign stocks, bonds and direct investments made by US companies and individuals for the last 20 years are being repatriated. It is argued that the massive amount of foreign investment by US organizations dwarfs the amount of currency held by central banks, and willy-nilly repatriation based upon fear will cause the US dollar to continue to rise.

This is clearly the current psychology and the reason that so many speculators are buying dollars and selling other currencies… but we doubt the staying power of this thesis.

WHY WE DISPUTE THIS THESIS

We are asking the question “Why would those who want their assets to grow, repatriate them to the US? Why would they not move them from Europe, or other parts of the world where they are not providing good returns to China and India where the economic growth rate is positive, and the opportunities for profit are good?”

The answer is that fear and not rationality is dominating the investment process currently. So some investors are indeed repatriating assets to the US willy-nilly. However, we doubt that most investors are so short term oriented or so panicky. If investors were acting in a rational manner they would seek positive returns in China, India or some other country with good growth prospects, not minute returns in US Treasury Bills.

Further under new US tax proposals, profits will be taxed at higher rates in the US [should profits develop], and there is no doubt that the environment has become decisively less pro business in the past 2 months..

As time passes and rationality returns to the investment process, global investors will for many reasons, send money to those parts of the world where growth continues to be strong.  At that point in time, the dollar will once again begin to decline.

Some say it will take a long time for people to become rational and that they will remain panicky for quite a while. I dispute that argument. Those who panic easily never make money in the first place, those who have made money and thus hold it abroad, are not the panicky types and thus we see the dollar rally lasting for a much shorter time than some other observers.

Respectfully yours,
Monty Guild
www.GuildInvestment.com

By Pham-Duy Nguyen

Feb. 27 (Bloomberg) — Gold fell, capping the first weekly loss in three, as the dollar strengthened to the highest level since April 2006, eroding the appeal of the precious metal as an alternative investment. Silver advanced.

The U.S. Dollar Index rose against the currencies of six major trading partners on demand for a haven after the U.S. bailed out Citigroup Inc. for a third time, stoking concerns that the credit crisis and the recession may deepen. U.S. stocks fell for a third straight day and the Reuters/Jefferies CRB Index of 19 commodities dropped as much as 1.9 percent.

“The demand for dollars has outweighed the demand for gold in terms of safe-haven flows,” said Ralph Preston, a commodity analyst at Heritage West Futures Inc. in San Diego. “Gold is turning into a currency and competing with the dollar. It’s the battle of the safe havens.”

Gold futures for April delivery fell 10 cents to $942.50 an ounce on the Comex division of the New York Mercantile Exchange. That left the metal down 6 percent for the week, the first decline since Feb. 6 and the biggest since Dec. 5.

Gold and the dollar generally move in the opposite direction. The correlation hasn’t held this year as demand for both the U.S. currency and gold have risen because of the financial crisis. The dollar index has gained 1.7 percent this week.

“The gold price will remain supported into the second quarter as fears towards world growth persist,” analysts at Deutsche Bank AG said today in a report. “However, we remain concerned that the gold price rally is based on shaky foundations as it has not been accompanied by a weakening of the U.S. dollar.”

Gold-Dollar Moves

Gold and the dollar last moved in tandem in 2008, when the Dollar Index gained 6 percent and gold rose 5.5 percent. Before last year, gold gained 18 percent in 2005 and the Dollar Index rose 13 percent.

Still, gold may be a better bet than the dollar as U.S. government spending and corporate bailouts eventually spark inflation and erode purchasing power, some analysts say.

The U.S. government has pledged more than $9.7 trillion to helping ease the recession and credit crisis. Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, reached a record 1,029.3 metric tons yesterday.

“The safe-haven trade is the major reason people are buying gold now,” said James Turk, founder of GoldMoney.com, which has $608 million of gold and silver in storage for investors as of today. “Within six months or so people will be buying gold for another reason — to protect themselves against inflation.”

Silver Outlook

Silver may rise as a cheaper alternative to gold, analysts have said. Before today, the metal had lost 31 percent in the past year while gold had declined 0.7 percent.

Gold reached $1,007.70 on Feb. 20, the highest price for a most-active contract since March 18. Gold touched a record $1,033.90 on March 17.

Silver futures for May delivery rose 13.5 cents, or 1 percent, to $13.11 an ounce in New York. The most-active contract fell 9.5 percent for the week, the first decline since Jan. 16.

Platinum futures for April delivery rose $32.20, or 3.2 percent, to $1,085.30 an ounce on Nymex. The most-active contract fell 0.9 percent for the week, the first drop since Jan. 16.

Palladium futures for June delivery fell $2.45, or 1.2 percent, to $195.70 an ounce.

Source: http://www.bloomberg.com/apps/news?pid=email_en&refer=&sid=aIyIUD2GhIOQ

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Dunno about you but my holdings have had 6 straight weeks of gains and as long as I have tracked weekly averages as in years, I have never seen that happen other than once before when it did  6 straight weeks in adjusted local currency. But as for 7, never…and I mean never in years of doing this. A correction was overdue and healthy. The only question is how deep and my guess as many experts alike, is probably not going to be very deep.

There are contrarians out there that are expert in DOW theory that have projected a mass drop still needed to do the final flush out in precious metals. They talk about the 9 year cycle and marvel that gold/ silevr have held up so well. They care nothing for fundamentals but purely chart orientated. To be fair to them they predicted a fairly substantial drop last year and they were right but even as we watch this massive money printing right now, acknowledge that to trust on a big drop in metals amidst events as such today is potentially risky.

And at the other extreme we have people crying death to the US dollar yet it seems to have held up very well and by some of the best guys I follow its considered the best looking beauty in a leper colony and who knows, all of 2009 could well be a year in which shorting the US dollar could be a very dumb move so to watch as we have lately – the US dollar climb on its index and gold and silver climb as well, to me surely demonstrates the monetary characteristics of all currencies being suspect.

Final thought, that comment in the article

Investment in the SPDR Gold Trust, the biggest exchange-traded fund backed by bullion, reached a record 1,029.3 metric tons yesterday.

Where are they getting the gold from in such a tight market… hmmm!, I believe the suggestion they are using derivatives (colloquial for futures contracts and similar) to hedge positions just to show on there books they have what they say…makes the ETF’s highly suspect and should global financial melt occur, look out.

Duncan Cameron
Affiliate
The Anglo Far East Company

Let’s give the Fed some competition. Abolish legal tender laws and see whose money people trust.

Let’s go back to the gold standard.

If the very idea seems at odds with what is currently happening in our country — with Congress preparing to pass a massive economic stimulus bill that will push the fiscal deficit to triple the size of last year’s record budget gap — it’s because a gold standard stands in the way of runaway government spending.

Under a gold standard, if people think the paper money printed by government is losing value, they have the right to switch to gold. Fiat money — i.e., currency with no intrinsic worth that government has decreed legal tender — loses its value when government creates more than can be absorbed by the productive real economy. Too much fiat money results in inflation — which pools in certain sectors at first, such as housing or financial assets, but ultimately raises prices in general.

Inflation is the enemy of capitalism, chiseling away at the foundation of free markets and the laws of supply and demand. It distorts price signals, making retailers look like profiteers and deceiving workers into thinking their wages have gone up. It pushes families into higher income tax brackets without increasing their real consumption opportunities.

In short, inflation undermines capitalism by destroying the rationale for dedicating a portion of today’s earnings to savings. Accumulated savings provide the capital that finances projects that generate higher future returns; it’s how an economy grows, how a society reaches higher levels of prosperity. But inflation makes suckers out of savers.

If capitalism is to be preserved, it can’t be through the con game of diluting the value of money. People see through such tactics; they recognize the signs of impending inflation. When we see Congress getting ready to pay for 40% of 2009 federal budget expenditures with money created from thin air, there’s no getting around it. Our money will lose its capacity to serve as an honest measure, a meaningful unit of account. Our paper currency cannot provide a reliable store of value.

So we must first establish a sound foundation for capitalism by permitting people to use a form of money they trust. Gold and silver have traditionally served as currencies — and for good reason. A study by two economists at the Federal Reserve Bank of Minneapolis, Arthur Rolnick and Warren Weber, concluded that gold and silver standards consistently outperform fiat standards. Analyzing data over many decades for a large sample of countries, they found that “every country in our sample experienced a higher rate of inflation in the period during which it was operating under a fiat standard than in the period during which it was operating under a commodity standard.”

Given that the driving force of free-market capitalism is competition, it stands to reason that the best way to improve money is through currency competition. Individuals should be able to choose whether they wish to carry out their personal economic transactions using the paper currency offered by the government, or to conduct their affairs using voluntary private contracts linked to payment in gold or silver.

Legal tender laws currently favor government-issued money, putting private contracts in gold or silver at a distinct disadvantage. Contracts denominated in Federal Reserve notes are enforced by the courts, whereas contracts denominated in gold are not. Gold purchases are subject to taxes, both sales and capital gains. And while the Constitution specifies that only commodity standards are lawful — “No state shall coin money, emit bills of credit, or make anything but gold and silver coin a tender in payment of debts” (Art. I, Sec. 10) — it is fiat money that enjoys legal tender status and its protections.

Now is the time to challenge the exclusive monopoly of Federal Reserve notes as currency. Buyers and sellers, by mutual consent, should have access to an alternate means for settling accounts; they should be able to do business using a monetary unit of account defined in terms of gold. The existence of parallel currencies operating side-by-side on an equal legal footing would make it clear whether people had more confidence in fiat money or money redeemable in gold. If the gold-based system is preferred, it means that people fully understand that the purpose of money is to facilitate commerce, not to camouflage fiscal mismanagement.

Private gold currencies have served as the medium of exchange throughout history — long before kings and governments took over the franchise. The initial justification for government involvement in money was to certify the weight and fineness of private gold coins. That rulers found it all too tempting to debase the money and defraud its users testifies more to the corruptive aspects of sovereign authority than to the viability of gold-based money.

Which is why government officials should not now have the last word in determining the monetary measure, especially when they have abused the privilege.

The same values that will help America regain its economic footing and get back on the path to productive growth — honesty, reliability, accountability — should be reflected in our money. Economists who promote the government-knows-best approach of Keynesian economics fail to comprehend the damaging consequences of spurring economic activity through a money illusion. Fiscal “stimulus” at the expense of monetary stability may accommodate the principles of the childless British economist who famously quipped, “In the long run, we’re all dead.” But it shortchanges future generations by saddling them with undeserved debt obligations.

There is also the argument that gold-linked money deprives the government of needed “flexibility” and could lead to falling prices. But contrary to fears of harmful deflation, the big problem is not that nominal prices might go down as production declines, but rather that dollar prices artificially pumped up by government deficit spending merely paper over the real economic situation. When the output of goods grows faster than the stock of money, benign deflation can occur — it happened from 1880 to 1900 while the U.S. was on a gold standard. But the total price-level decline was 10% stretched over 20 years. Meanwhile, the gross domestic product more than doubled.

At a moment when the world is questioning the virtues of democratic capitalism, our nation should provide global leadership by focusing on the need for monetary integrity. One of the most serious threats to global economic recovery — aside from inadequate savings — is protectionism. An important benefit of developing a parallel currency linked to gold is that other countries could likewise permit their own citizens to utilize it. To the extent they did so, a common currency area would be created not subject to the insidious protectionism of sliding exchange rates.

The fiasco of the G-20 meeting in Washington last November — it was supposed to usher in “the next Bretton Woods” — suggests that any move toward a new international monetary system based on gold will more likely take place through the grass-roots efforts of Americans. It may already be happening at the state level. Last month, Indiana state Sen. Greg Walker introduced a bill — “The Indiana Honest Money Act” — which would, if enacted, allow citizens the option of paying in or receiving back gold, silver or the equivalent electronic receipt as an alternative to Federal Reserve notes for all transactions conducted with the state of Indiana.

It may turn out to be a bellwether. Certainly, it’s a sign of a growing feeling in the heartland that we need to go back to sound money. We need money that works for the legitimate producers and consumers of the world — the savers and borrowers, the entrepreneurs. Not money that works for the chiselers.

Ms. Shelton, an economist, is author of “Money Meltdown: Restoring Order to the Global Currency System” (Free Press, 1994).

Original Article here: http://online.wsj.com/article/SB123440593696275773.html

I’ve been trying to resolve what’s behind the recent inversion of the historic premium that West Texas Intermediate [WTI] Crude Oil has enjoyed versus Brent Crude? Historically, West Texas Intermediate Crude Oil trades at a premium price to Brent Crude Oil for quality as well as logistical reasons. In recent weeks and months – WTI has been trading at a deep discount to Brent Crude:

From an historical perspective, this price disparity pictured above is BACKWARDS. There is a reason:

Recently, I shared with my subscribers some unusual machinations which are acknowledged to have occurred by the U.S. Dept. of Energy [DOE] back in May / June 2008 – from the DOE 2008 annual report:

The excerpt above illustrates that the DOE stopped filling the Strategic Petroleum Reserve [SPR] as of last June [2008] – an activity that had been underway – more or less continuously – since 1999.

But the above excerpt says more than just that; it specifically states that,

“Oil from the MMS offshore leases has been exchanged for other crude oil”

The “exchange” cited in the aforementioned quote above is also known as an “OIL SWAP.”

Where Else Has the U.S. Government Done Swaps?

There is proof that the U.S. Government is involved in Gold Swaps. From James Turk’s, The US Gold Reserve is Now in Play:

I have long suspected that the US Gold Reserve is being used by the gold cartel as a tool to help it try capping the gold price. See for example the April 23, 2001 press release by the Gold Anti-Trust Action Committee [ http://www.gata.org/node/4223 ] which refers to my then recently published article, “Behind Closed Doors”. The complete article is available at the following link: http://www.fgmr.com/clsddoor.htm

“Behind Closed Doors” provided compelling evidence that part of the US Gold Reserve had been swapped for gold in the Bundesbank. Gold was then removed from the Bundesbank’s vault and loaned into the market as part of the gold cartel’s price capping scheme.

We now have more evidence that all may not be well in Fort Knox. Many thanks go to Bill Rummel of Charleston, South Carolina for bringing the following to my attention.

The US Treasury quietly made a subtle change to its weekly reports of the US International Reserve Position, which includes the US Gold Reserve. This change was first made on May 14th. The differences can be seen by comparing the report’s old format release on May 8th to the new format used the following week. Here are the links:

http://www.treas.gov/press/releases/2007581342179779.htm http://www.treas.gov/press/releases/20075141738291821.htm

Note the additional description of gold provided in the new reporting format. It says the US Gold Reserve is 261.499 million ounces and importantly, that the gold is now reported “including gold deposits and, if appropriate, gold swapped” [emphasis added].

This description provides clear evidence that the US Gold Reserve is in play. Gold has been removed from US Treasury vaults and placed on deposit, presumably in the couple of bullion banks the Treasury has selected to assist with its gold price capping efforts.

The U.S. Treasury has only recently acknowledged that they have been involved in gold swaps. Not withstanding, for accounting purposes, they still claim to possess the SAME NUMBER OF PHYSICAL OUNCES. When gold is swapped or leased – it almost always physically leaves the vault and it is sold into the market – and it is replaced with an IOU.

As evidenced above, crude oil has also been swapped – likely sweet crude, WTI – for less expensive sour crude. Under such a scenario – physical sweet crude left the SPR – creating a market glut of “premium sweet oil”. This set off an engineered over-supply chain reaction in the crude complex which depressed WTI’s price relative to Brent Crude. Because supply chain storage facilities are finite and were completely filled in the Texas / Cushing region – this also contributed to further price declines in the crude complex.

This would also explain the phenomena of the world’s VLCC [very large crude carrier] Fleet being fully booked for storage purposes while the Baltic Dry Index is at or near record lows.

Like the price trend of gold – the price trend of WTI crude is widely viewed as a benchmark for inflationary expectations in the economy.

In the scenario described above, there would be NO APPRECIABLE ACCOUNTING CHANGE to the reported gross number of barrels in the Strategic Petroleum Reserve [SPR] – but only the “subtle acknowledgement” of the composition alluded to in the DOE’s annual report.

We know that such actions were contemplated because of law makers’ unsuccessful attempt [in May of 2008] to pass a law making such actions legal and above board when H. R. 6067 failed to pass into law – because it was deemed to compromise long-term U.S. energy security:

H.R. 6067, The Invest in Energy Independence Act

This item is from the 110th Congress (2007-2008) and is no longer current. Comments, voting, and wiki editing have been disabled, and the cost/savings estimate has been frozen.

Detailed Summary

` Invest in Energy Independence Act – Instructs the Secretary of Energy to publish a plan to: (1) exchange light grade petroleum from the Strategic Petroleum Reserve (SPR) for an equivalent volume of heavy grade petroleum plus certain cash bonus bids received that reflect the difference in the market value between light grade and heavy grade petroleum and the timing of deliveries of the heavy grade petroleum; (2) deposit into the SPR Petroleum Account, from the gross proceeds of the cash bonus bids, the amount necessary to pay for the costs of the exchange; (3) deposit 90% of the remaining net proceeds from the exchange into the Energy Independence and Security Fund established by this Act; and (4) deposit the remaining balance into the SPR Petroleum Account to acquire additional petroleum for the SPR.

So we do know that efforts were made to do this “above board”. Heck, even then candidate for President Obama liked the idea,

ANALYSIS-Obama oil plan may weaken U.S. emergency stockpile

Tom Doggett
Reuters North American News Service

Aug 07, 2008 11:43 EDT

WASHINGTON (Reuters) – Democratic presidential candidate Barack Obama’s plan to release oil from the Strategic Petroleum Reserve may lower crude and gasoline prices in the short term, but it could also leave the United States more vulnerable in a supply emergency.

Obama called this week for easing fuel prices by releasing some 70 million barrels of light, sweet crude from the nation’s stockpile and swapping it for less expensive heavy, sour oil.

The hope is that putting more oil on the market will push down crude prices and those savings will be passed on to consumers at the gasoline pump.

Cheaper crude would make it more profitable for refiners to make gasoline, diesel fuel and heating oil, and encourage them to produce more of those petroleum products. The additional supplies would lower the prices for the fuels.

“Would it bring down prices initially? Sure,” said Sarah Emerson, managing director of Energy Security Analysis Inc, a Massachusetts-based consulting firm. “It’s more supply and the price will go down.”

Obama says releasing oil from the reserve is meant to provide short-term relief for consumers, and is not a long-term solution to the nation’s energy problems……

From all of this evidence – and yes it is EVIDENCE – it is now highly likely that after failing to gain legal authority to utilize sweet crude in the SPR – DESPERATE authorities – who, no doubt will wrap themselves in the flag and claim they acted in the name of National Security – DID CONDUCT oil swaps. The timing of all these events lines up perfectly with the Waterfall decline in oil prices:

Original article at this website:

http://news.goldseek.com/GoldSeek/1234386901.php

Bloomberg put out some interesting news regarding the silver market stating that refined silver output in China has peaked and it could stop growing because less will be produced as a result of halting of mine expansions, higher costs for production and lower prices received for the metal itself.

Zhou Juqiu, chairman of the gold and silver division at the China Non-ferrous

Metals Industry Association, said in an interview. Output may rise to nearly 10,000 metric tons this year from 9,092 tons in 2007, he said. Silver prices have more than halved from an 18- year high in March after hedge funds and speculative investors sold commodities to raise cash, while recession fears reduced demand for industrial use of the precious metal.

China’s annual silver output growth already slowed to 10 percent last year compared with an average 30 percent between 2001 and 2006, Zhou said. `There won’t be much growth going forward” in the next few months, Zhou said. While producers are still “doing ok,” they are faced with an increasingly difficult environment, including tighter financing and reduced export market, he said.

In July China revoked the export rebates on silver to control use of limited natural resources. This will force China to rely on imports to fill the needs for the precious metal.  “China has the world’s biggest potential for silver consumption,” said Li Xiaoni, vice president of China Chamber of Commerce of Metals, Minerals & Chemicals Importers & Exporters.

The country’s consumption already accounts for 70 percent of the global total for industrial use, she said. China’s consumption of silver has grown by over 10 percent recently reaching 4,000 tons last year, Zhou said. China has 26,000 tons of silver reserves, about 9.6 percent of the global total, and the fifth biggest in the world, he said. About 60 percent to 70 percent of China’s silver is the byproduct of smelting for lead, zinc and copper, he said.

This bit of news is interesting considering everyone is talking about the entire slowdown throughout the world. Perhaps the Chinese have not yet caught up with enough silver using I-Pods and Cell phones.

During our trip to Europe for the Silver Summit in three main cities London, Paris, and Munich it was relayed to this writer that the silver delivery times from the LBMA keep getting moved back. In fact it was suggested that any recognizable problem might actually take place out of London rather than New York.

However, even though the source was top-notch it is still considered a rumor by us and therefore should be considered such by you. However, if we examine this a bit further we know when there was essentially a default in nickel in London some time ago, the Association required those that had physical to “loan” it back into the market for those that were on the wrong side of the market.

In the meantime the Comex silver supply has decreased now standing at about 123 million ounces. A few months ago it stood much higher and as reported previously and over 10 million ounces have moved into investors hands (Eligible Category) within the Comex holding facilities. The dealers are now basically in control of roughly 60 million ounces of silver.

I have received some feedback on people that have just given up on the precious metals story, and some that trust gold only, or like the metal but wish they never heard of a mining company.

In today’s world black is white and up is down. Very little makes sense and sometimes even when you win you can end up “losing.” This does not mean that you should give up on this area of your portfolio. In our studied view nothing will be doing better in the future than the precious metals and eventually the underlying mining shares (that survive).

In conclusion, 2009 will be a trying year and we see a rally ahead but are approaching it with caution.

By Arnd Wiegmann and Lisa Jucca

MENDRISIO/ZURICH, Switzerland, Dec 17 (Reuters) – Sealed off by grey concrete walls and barbed wire, the workmen in protective glasses and steel-toed boots at this smelter cannot work fast enough to meet demand from the nervous rich for gold.

This refinery near Lake Lugano in the Alps is running day and night as people worried about recession rush to switch their assets into something that may hold its value.

“I have been in the gold business for 30 years and I have never experienced anything like this,” said Bernhard Schnellmann, director for precious metal services at the refiner Argor-Heraeus, one of the world’s three largest.

“Production has dramatically increased since the middle of the year. We cannot cope with demand,” said Schnellman, wearing a gold watch on his wrist.

Spot gold hit a record $1,030.80 an ounce on March 17. It fell below $700 in late October, partly because investors sold their holdings to cover losses in equity and bond markets hit by the credit crisis, and is now around $830 an ounce.

The trigger for the price to rise again could come from a much weaker dollar, making gold cheaper for holders of other currencies, and a renewed aversion to paper assets as governments and central banks pump large amounts of cash into the economy, stoking inflation.

Smoke billows as the molten gold, like glowing butter, is poured. To cool it, the worker drops it into water. It hisses as it hits. Once hardened in moulds, the gold bars are embossed with the refinery’s seal. Workers wearing white gloves stack them into boxes like domino pieces.

Though Switzerland is not a gold miner, it is home to some of the world’s largest refineries, which process an estimated 40 percent of all newly mined gold.

Argor-Heraeus is part-owned by the Austrian Mint and a subsidiary of Germany’s Commerzbank. Commercial and central banks are its chief customers and it says it processes some 350-400 tonnes of gold and 350 tonnes of silver per year.

Customers buying gold bars, which can weigh more than 10 kg each, have to wait roughly a month, taking into account the year-end holiday season.

For those buying coins or ingots, which can fit into the palm of a hand, the delay is six to eight weeks. A year ago, these small products could be had within a couple of days.

Worries about the banking system globally have boosted worldwide demand for physical gold, the Gold Council said.

“Many (people) are afraid of leaving their money in banks,” said Sandra Conway, managing director at ATS Bullion in London, which sells bullion and gold coins to institutions and the retail market.

“It’s difficult to quantify, but I would say our turnover over the last three months has certainly doubled compared to the previous three months,” she said.

FULL CAPACITY

Other Swiss gold refiners also say business is booming.

“Since the summer we have experienced a sharp rise in demand for certain gold products. The one-kilo bar has become very popular,” said Fiorenzo Arbini, in charge of health and safety at Pamp, another large Swiss refiner.

“People used to buy certificates, now they want physical gold.”

Schnellmann said the Argor-Heraeus smelter is operating at full capacity, three eight-hour shifts a day. Conquering the backlog by hiring is difficult, because each candidate has to undergo a security check.

Gold refiners were established in Switzerland to supply the watch industry and, later, jewellery-makers in Italy.

Switzerland’s largest banks stepped in to replace a void in gold trading while the London gold market was shut after World War Two and again during a brief closure in 1968.

The former Soviet Union, another top gold producer, chose Zurich banks to handle most of its gold sales in the 1970s and 1980s.

“Gold has an image of being the asset of last resort. This could be viewed as old-fashioned but this is how enough people with enough money to matter think,” said Stephen Briggs, a metals strategist at RBS Global Banking & Markets.

GOLD TOUCH

India, China and the Middle East remain the biggest gold importers, particularly for jewellery. But demand for physical gold has exploded also in Europe, the Gold Council said.

In Switzerland, home to the world’s largest private banking industry, demand for gold bars and coins shot up six-fold to 21 tonnes in the third quarter of 2008, more than in any other European country.

Retail investment in gold rose 121 percent in the third quarter of 2008, an important contributor to the overall increase in global demand, the Gold Council said.

In that period purchases of gold bars by retail investors, who often buy through commercial banks, rose nearly 60 percent, notably in Switzerland, Germany, and the United States.

There was a surge of interest among professional investors shortly after the collapse of Lehman Brothers in September.

Private bank Julius Baer in October launched a fund to invest exclusively in gold bars stored in highly secured vaults in Switzerland.

“The fascination with gold has been there since the beginning of civilisation,” said Schnellmann. “It cannot be explained: you can’t eat gold, you cannot build anything resistant with it and yet people want to hoard it.” (Additional reporting by Pratima Desai in London; Editing by Catherine Bosley and Sara Ledwith)

Posted by: Alex Stanczyk

I find it interesting to note, that the common thought about gold is that it has peaked, is overbought, and will only go down from here.

This article gives a good argument as to why that may not be the case.

Your Road Map to the Bull Market in Gold

By Jeff Clark, editor, BIG GOLD

Does this sound like your world?

You trudge to the office, nervous about keeping your job. Some of your friends are out of work. The economy struggles, and recession seems just around the corner. Stores where you once shopped are now closed. Americans are still shooting and being shot at in the Middle East. The price of oil is far off its peak but remains high.

The government has promised action, but frankly you don’t like the president’s ideas nor trust the government’s judgment, since they don’t seem to notice that the budget and trade deficits are huge and show no sign of easing.

You invested in some gold and gold stocks, but they’re all down. Everything has lost value. Things are looking grim indeed.

If any of this sounds familiar, you’ve got a good memory. It’s what was happening in November 1975.

Yes, things didn’t look so rosy back then, either. And yet look how November 1975 fits into gold’s bigger picture:

Gold During the 1970s Bull Market

Now compare that chart to today’s…

Gold During the Current Bull Market

You’ll see that from 1970 to 1974, gold rose 400%. In our market (2000 to 2008), gold climbed 290% to its March 2008 peak.

From 1974 to 1976, gold fell 40%. In the current market, gold has fallen 31% in eight months, a much steeper decline.

Finally, during the three-year rise leading to gold’s peak of $850 in 1980, it gained 670% from its 1976 low.

This year’s gold price has been behaving much as it did in 1975.

So where will the price be a few years from now? I can tell you that Casey Research expects gold’s chart to look more and more like the 1970s before this is over. The U.S. government has only very recently fired the starting gun for racing inflation, but it has fired it very loudly.

In just the last two months, the Fed has increased the basic money supply (cash in circulation plus deposits held by commercial banks at the 12 Federal Reserve Banks) by nearly 50%. Nothing close to such a rapid increase has ever happened before in the U.S. It’s the kind of news that normally comes only from desperate banana republics. And it always means rapid price inflation is on the way.

What the Federal Reserve has done in the last two months guarantees high inflation. But the timing is unknown. In fact, it’s unknowable.

Looking at the past, a pop in the basic money supply gets felt strongly throughout the financial markets within six months or so. But that’s just the average experience, with some inflationary episodes running much faster and others running much slower. And our current situation is anything but average – very recent but extreme money growth colliding with a years-old but extreme credit crisis.

So we’ll have to sit and let the timing show itself. And if what you are sitting on is gold, you should sit comfortably. Patience served gold investors well in the mid-70s. It will serve them well again.

Regards,

Jeff Clark

A Peak Oil “Warning” from the IEA

By Ian Cooper | Tuesday, November 11th, 2008

What does it mean when a usually conservative International Energy Agency (IEA) issues a gloomy report?

It means that recent cheap oil isn’t going to last – and that $100 oil will soon be a part of our daily lives… again.

The IEA is warning that crude oil will average about $100 between 2008 and 2015 because of an unavoidable energy crunch. And that the biggest cause of that crunch is “under-investment” in new and existing fields, which are needed to make sure oil production can keep pace with growing demand and slowing supply.

The agency also believes that the world needs to invest some $350 billion a year through 2030 to keep up with oil depletion rates. They’re claiming that current oil reserves are falling nine percent a year, as compared to three to five percent forecasts from analysts.

So, consider this.

If the world is using about 86 million barrels of oil everyday, a depletion rate of nine percent would mean that we’d need to find and produce another 7.7 million barrels a day just to remain at breakeven.

That’s like saying we need another Saudi Arabia, which is delivering a little more than nine million barrels a day after recent cutbacks.

Worse, the International Energy Agency outlook report, being released tomorrow—November 12—reveals that the world will eventually need to increase its production by “64 million barrels a day, or the equivalent of six times the current production of Saudi Arabia.”

Precious metals refinery capacity maxed out globally in recent weeks due to record levels of investor demand in the metals.

Recent currency volatility and financial institution fragility has been cited as the driving reasons for the record numbers of investors flocking to silver and gold in recent weeks looking for the stability and safe haven the metals have traditionally offered.  Global bullion refining capacity has been quickly overwhelmed by the sudden spike in demand for physical bullion supply.

“People are often surprised to learn there are less than seventy industry accredited refiners in the entire world” said AFE’s bullion treasury manager Simon Heapes this week, “refineries have been running three fully staffed shifts most of the year.  The industry is just not geared for such huge spikes in demand as we have seen in recent weeks”.

Many refineries are announcing long delivery delays and many are taking no further orders till Q1 quarter of 2009, particularly for refining of smaller investor type bars and coins, while North America coin dealers have been out of all stock for many weeks.

AFE announced this last week after weeks of record demand it continues uninterrupted supply to its clients with allocated good delivery bars through its network of long term supply relationships and unique global infrastructure.  “In peak times like these, long term multi-decade relationships are critical” commented AFE’s Founding Director, Philip Judge.  Meanwhile, AFE’s gold shekel distribution partner Joseph Wealth Systems is providing on time delivery to its growing numbers of customers and colleagues in 37 countries.